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German coffers bulge as country books record surplus

Saving is said to be a German virtue, something that can be easily believed if the country's whopping budget surplus is anything to go by. Yet what is good news for Germany may provoke ire further afield.

The German economy continues to power forward, despite concerns over how global trade conflicts could affect Europe's powerhouse.

Destatis, the country's main statistics office, released data on Friday showing that the country had notched up yet another six-month record budget surplus in the first half of 2018, taking in €48.1 billion ($55.6 billion) more than it spent from January to June when federal, state and local accounts were added together.

"Favorable employment and business developments, as well as a moderate spending policy" contributed to the surplus, which amounted to 2.9 percent of German gross domestic product (GDP), Destatis said on release of the data.

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German exports swell on other countries' debt

German exports swell on other countries' debt

Export trade in goods is by a distance the main factor behind Germany's surplus, accounting for more than €200 billion of the total figure.

While the latest figures are ultimately a positive reflection on the well-being of the German economy, powering ahead despite rising global concerns, they are unlikely to be greeted with enthusiasm around the world.

US President Donald Trump has been a particularly vocal critic of Germany's surplus, saying the country's surging exports contribute to global trade imbalances.

However, pointing to the fact that Germany's import rate is growing at a faster pace than the export rate, ING-Diba economist Carsten Brzeski said the situation was more balanced than some of the criticism would suggest.

"Defying the often-heard international criticism, the economy is already showing a very balanced growth model," he said.

Powering on

Beyond the surplus issue, the stronger-than-expected growth rate for Q2 suggests the German economy is well-placed to weather any storms which come its way as a result of global trade tensions, driven in part by Trump's "America First" policies and ongoing trade issues with China.

The trade tensions between the US and the EU "were a threat but did not leave any significant marks on the economy," Brzeski added, but he warned that this could change fast if the current agreement with Washington fails to hold.

EU-US trade relationship

More than a trillion euros in trade

The European Union is the US' largest export market, accounting for about one-fifth of all US exports. Similarly, one-fifth of EU exports go to the United States. EU-US trade in goods and services was €1,069.3 billion in 2017. The EU imported €256.2 billion in goods from the US, and exported €375.8 billion.

EU-US trade relationship

EU trade surplus

The main exports and imports between the EU and US fall into the categories of machinery and vehicles, chemicals and other manufactured goods. Combined, they accounted for 89 percent of EU exports and imports with the US in 2017. In all three categories, as well as food and drink, the EU had a trade surplus. The US had a trade surplus in raw materials and energy.

EU-US trade relationship

Cars, machinery top exports

At €167 billion, machinery and vehicles were the largest EU export category to the US, accounting for 44.4 percent of goods exports. The €111.5 billion in machinery and transport equipment was the largest EU import from the US, accounting for 43.6 percent of imports.

EU-US trade relationship

Small part of trade pie

At the end of May 2018, the Trump administration imposed a 25 percent tariff on EU steel and 10 percent tariff on aluminum. Steel and aluminum exports to the United States were worth €3.58 billion in 2017.

EU-US trade relationship

Retaliatory tariffs

In response, the European Union developed a list of products it may subject to retaliatory tariffs. These include typical American products like peanut butter, bourbon whiskey, Harley Davidson motorcycles, jeans and orange juice. The exports targeted by the EU are worth about €2.8 billion annually, according to EU officials.

EU-US trade relationship

Services include travel, education

For services, the EU imports amounted to €219.3 billion and exports €218 billion. The top services were in professional and management services, intellectual property, travel and education. About a third of EU-US trade consists of intra-company transfers.